The global economy faced numerous challenges in 2021. While COVID-19 vaccinations became more widely available in some countries, variants led to further waves in the pandemic. While consumer demand began to recover, supply chain disruptions restricted supply.
Despite these and other hurdles, the world economy expanded by 6.1% in 2021. In this Markets in a Minute from New York Life Investments, we explore GDP growth by country to see which countries had the best and worst growth. It’s the first in a two-part series that explores GDP growth around the world.
What is the Base Effect?
Before diving into the data, it’s worth highlighting that 2021’s GDP growth numbers are impacted by the base effect. Whenever growth is shown over a time period, it is being compared to a “base” or starting value. If the base value is abnormally high or low, it can distort the growth figures.
In this case, the year-over-year growth is comparing growth from 2020 to 2021. Since the COVID-19 pandemic caused 2020 GDP growth to be negative in many countries, 2021 GDP growth is measured from a lower starting point. This can make percentage growth appear higher, though in many cases economies were simply recovering from the pandemic slump.